Social norms and firms’ discriminatory pay-setting

This study analyzes the relationship between discriminatory social attitudes and the variation of within-firm pay gaps by combining data on regional votes on gender equality laws with a data set of multi-establishments firms and their workers. The data set allows us for the first time to study gender pay gaps within the same firm across establishments located in regions with varying discriminatory social attitudes. Our results show that firms have larger pay gaps in regions with stronger discriminatory social attitudes. This result remains robust when we account for detailed worker and job characteristics and prevails for different subsamples. Thus we show that a relationship between discriminatory social attitudes and gender pay gaps prevails even after accounting for the sorting of women and men into different firms and occupations